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SUPREME COURT OF INDIA
K.G. Balakrishnan, CJ
Rangappa – Appellant
Versus
Mohan – Respondent
CRIMINAL APPEAL NO. 1020 OF 2010
V. N. RAGHUPATHY
Section 139 of the Negotiable Instruments Act, 1881, creates a mandatory statutory presumption that a cheque was issued for a legally enforceable debt. An accused can rebut this presumption by raising a probable defence based on a 'preponderance of probabilities', even without independent evidence.
Headnote:(A) Negotiable Instruments Act, 1881 - Sections 118(a), 138 and 139 - Dishonour of cheque - Presumption in favour of holder - Rebuttal of statutory presumption - Standard of proof required to rebut the presumption under S.139 is 'preponderance of probabilities' - Discrepancies in complainant's version alone do not automatically rebut the presumption if the accused fails to raise a probable defence. (Paras 14, 15)
(B) Negotiable Instruments Act, 1881 - Section 138 - Stop payment instructions - Whether offence made out - Cheque dishonoured due to 'stop payment' instructions does not inherently negate the applicability of S.138; it must be proven by the accused that sufficient funds existed or that no debt or liability was at stake at the time of presentation. (Para 9)
Facts of the case:
The appellant sought to overturn a conviction for the dishonour of a cheque, arguing that the cheque was a lost blank instrument misused by the respondent. The lower court initially acquitted the appellant, citing discrepancies in the complainant’s testimony regarding the nature of the debt (hand loan vs. construction expenses). The appellate court, however, reversed the acquittal, holding the appellant failed to raise a probable defence to rebut the statutory presumption under the Negotiable Instruments Act.
Findings of Court:
The court held that once the signature on a cheque is admitted, the presumption under S.139 applies, including the presumption of a legally enforceable debt. The appellate court found no error in the conviction, noting that the defence of a 'lost cheque' was inconsistent with the correspondence sent to the bank and was raised belatedly.
Issues: The court addressed the scope of the statutory presumption under S.139, the permissible standard for its rebuttal by an accused, and whether dishonour due to stop payment instructions attracts liability under S.138.
Ratio Decidendi: The presumption under S.139 is mandatory and includes the existence of a legally enforceable debt. The accused carries an evidentiary burden to produce evidence or rely on circumstances showing that the existence of such debt is improbable, satisfying a 'preponderance of probabilities' test. Result : Appeal dismissed; conviction upheld.
| Table of Content |
|---|
| 1. procedural history and factual matrix of cheque dishonour case. (Para 1 , 2 , 3 , 4 , 5 , 6 , 7) |
| 2. nature of statutory presumptions under the negotiable instruments act. (Para 8 , 9 , 10 , 11 , 12 , 13 , 14) |
| 3. application of evidentiary burden and final appellate ruling on conviction. (Para 15 , 16) |
1. Leave granted.
2. In the present case, the trial court had acquitted the appellant-accused in a case related to the dishonour of a cheque under Section 138 of the Negotiable Instruments Act, 1881 [Hereinafter ‘Act’]. This finding of acquittal had been made by the Addl. JMFC at Ranebennur, Karnataka in Criminal Case No. 993/2001, by way of a judgment dated 30-5-2005. On appeal by the respondent-complainant, the High Court had reversed the trial court’s decision and recorded a finding of conviction while directing that the appellant-accused should pay a fine of Rs. 75,000, failing which he would have to undergo three months simple imprisonment (S.I.). Aggrieved by this final order passed by the High Court of Karnataka [in Criminal Appeal No. 1367/2005] dated 26-10-2005, the appellant-accused has approached this Court by way of a petition seeking special leave to appeal. The legal question before us pertains to the proper interpretation of Section 139 of the Act which shifts the burden of proof on to the accused in respect of cheque bouncing cases. More specifically, we have been asked to clarify the manner in which this statutory presumption can be rebutted.
3. Before addressing the legal question, it would be apt to survey the facts leading up to the present litigation. Admittedly, both the appellant-accused and the respondent-claimant are residents of Ranebennur, Karnataka. The appellant-accused is a mechanic who had engaged the services of the respondent-complainant who is a Civil Engineer, for the purpose of supervising the construction of his house in Ranebennur. The said construction was completed on 20-10-1998 and this indicates that the parties were well acquainted with each other.
4. As per the respondent-complainant, the chain of facts unfolded in the following manner. In October 1998, the accused had requested him for a hand loan of Rs. 45,000 in order to meet the construction expenses. In view of their acquaintance, the complainant had paid Rs. 45,000 by way of cash. On receiving this amount, the appellant-accused had initially assured repayment by October 1999 but on the failure to do so, he sought more time till December 2000. The accused had then issued a cheque bearing No. 0886322, post-dated for 8-2-2001 for Rs. 45,000 drawn on Syndicate Bank, Kudremukh Branch. Consequently, on 8-2-2001, the complainant had presented this cheque through Karnataka Bank, Ranebennur for encashment. However, on 16-2-2001 the said Bank issued a return memo stating that the ‘Payment has been stopped by the drawer’ and this memo was handed over to the complainant on 21-2-2001. The complainant had then issued notice to the accused in this regard on 26-2-2001. On receiving the same, the accused failed to honour the cheque within the statutorily prescribed period and also did not reply to the notice sent in the manner contemplated under Section 138 of the Act. Following these developments, the complainant had filed a complaint (under Section 200 of the Code of Criminal Procedure) against the accused for the offence punishable under Section 138 of the Act.
5. The appellant-accused had raised the defence that the cheque in question was a blank cheque bearing his signature which had been lost and that it had come into the hands of the complainant who had then tried to misuse it. The accused’s case was that there was no legally enforceable debt or liability between the parties since he had not asked for a hand loan as alleged by the complainant.
6. The trial judge found in favour of the accused by taking note of some discrepancies in the complainant’s version. As per the trial judge, in the course of the cross-examination th
